Crises don't usually keep to ready-made communication plans. That means that flexibility, commitment, and basic principles can end up being far more important, Dominique Gerster writes in a piece for finews.first.
finews.first is a forum for authors to comment on economic and financial topics.
Crises in the financial industry often result in negative public attention, prompting substantial reputational and business damage that can end up taking a variety of forms. They have different causes, drivers, and consequences requiring specific, tailor-made communications.
Having a prepared communication plan in place for sets of selected scenarios is part of prudent business continuity management. However, they don't often anticipate the exact incident involved, and they can end up being ignored during the hectic pace of events at the outbreak of any new crisis.
Usually, when it comes to disclosable, public business transactions, the processes are reasonably predictable and can be planned. As an example, when a bank suffers a loss as a result of inadequate risk management, details need to be communicated as soon as the full extent becomes known.
«One-offs and external causes: minimum of planning is given»
The financial damage might be high and the public reaction fierce, particularly when it first becomes known. But the reputational damage is manageable in the long term – especially if it is «only» an isolated, singular event followed by consistent reassessment.
External shocks such as a pandemic or geopolitical incidents can pose a more daunting challenge to business continuity as they are hard to predict. Any communication plan is essentially a derivative of the pace-setting business plan for coping with the crisis itself, which can alleviate the pressure on the communications department. Depending on the event, the focus might not be as harsh on individual companies because an entire industry or, as in the case of COVID-19, the entire planet can be affected.
«Aggrieved customers gnaw at reputation»
Incidents in which customers or investors suffer damage are more complex and from a communication point of view. The question of whether and to what extent a bank is responsible can become a matter of public debate.
Lasting reputational damage can ensue when an agreement isn't reached quickly, particularly when the bank in question and its (former) clients trade blows publicly for years. Those responsible for communication are often on the back foot, repeatedly surprised by the new lawsuits, court defeats, and aggrieved customers who, with the support of PR consultants, go public with their story years after the actual event.
«Total chaos: reputational and trust crises»
Communications experts are particularly challenged during reputational crises where the cause or «the enemy», is not identifiable. Such cases can involve the media addressing business practices that are illegal or at least inappropriate. They can also result when the integrity of a member of the executive board is questioned, with the media often resorting to unnamed sources.
In such cases, the facts are difficult to establish internally because they involve topics that are closely linked to the private lives of the person being criticized persons − or are the subject of ongoing investigations. As a result, it is extremely hard to identify the ideal mileposts in advance and the communications department is often caught up with and overtaken by some new permutation of the original issue.
Five Principles of Crisis Communication
What all the types of crises at financial institutions outlined here have in common is that communications management can be planned in the best of cases, although it doesn't happen often. Given that, communication managers should consistently follow five principles that are always central in any emergency.
- 1. Rapid Establishment of a Crisis Team
The rapid availability of responsible decision-makers is key. As a rule, in addition to the CEO, this includes at least those responsible for human resources, legal services the affected business unit, and corporate communications.
The core team meets up to several times a day to establish the facts and derive the necessary measures. The communications officers provide information on the quantity as well as tonality of media coverage and develop scenario-based statements. In addition, they plan media conferences and discussions with journalists, if necessary.
- 2. Employees and Customers Deserve Special Attention
When the global business media conjures up doomsday scenarios with stark headlines or calls for heads to roll in social media, management's attention reflexively turns to the coverage and the posts, and how to respond. Typically, the interests of employees and customers take a back seat.
When it is no longer possible to inform employees about new findings in real-time, the company loses its communication power because employees start to, very understandably, interpret speculative headlines as facts and answer their customers' questions based on media articles and similar.
- 3. Ensure the Flow of Information in the Company
Just as the CEO receives regular communication updates, communicators and media spokespersons must have access to the facts such as investigation reports, court rulings, or legal opinions at all times. Only an informed team can ensure that the company can maintain information discipline publicly.
In addition to a crisis team staffed by decision-makers, other platforms should be established that enable the rapid exchange and thus consistency of messages at all levels. Communication must be set up in such a way that, on top of the direct exchange with senior management, there is also sufficient time to keep each other up to date.
- 4. Establish Stakeholder Contacts Before the Crisis
If you must find out which journalist works for which media company or what response a certain commentator can generate on X when you read the first headline, you are too late.
The communications department must already know its contacts from the media so that misunderstandings and emotions do not unnecessarily complicate work in the event of a crisis. Based on a professional understanding of the respective roles – prompt and fair cooperation should be possible. Of course, the same applies to working with other important stakeholders such as political representatives, NGOs, investors, and regulators.
- 5. Living a Culture of Error and Maintaining Team Spirit
A crisis would not deserve its name if trained processes could always be applied one-to-one to every situation that occurs. The opposite is usually the case. It can paralyze and be deeply unsettling, even at the very top! The communications department needs to know the facts, present a strategy, advise management, respond to media inquiries, draft customer letters, and present employee communications. And all this needs to be done simultaneously.
The result will hardly be perfect from day one due to time pressure. In addition to the aforementioned factors, what is needed above all is a committed and motivated communications crew that does not shy away from making mistakes and learning from them.
«Effective crisis communication requires a healthy amount of preparation»
In summary, effective crisis communication requires a healthy amount of preparation by designing scenarios for all plannable incidents in close coordination with business continuity management.
However, experience has shown that once the crisis has arrived, agility, collaboration, and a functioning flow of information are the most important factors.
Dominique Gerster is a freelance author and held senior corporate communications positions at UBS and Credit Suisse between 2005 and 2024.
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